“The Chaotic, Fantastical World of Donald Trump’s Tariffs,” written by Devashish Mitra, professor of economics and Gerald B. and Daphna Cramer Professor of Global Affairs, was published in TIME. Following is an excerpt:

Foreign exporters alone don’t pay for tariffs. The Trump Administration significantly underestimated the impact these tariffs would have on American consumers. The administration’s calculations incorrectly assume that American consumers of imports—including American producers who use imported inputs—bear only 25% of the cost of tariffs. But most high-quality studies show that nearly all the cost of tariffs is passed on to these consumers and businesses. If that faulty assumption were corrected, the “reciprocal tariffs” would have been half their proclaimed rates and much less costly for America’s trading partners, its own consumers and import-using producers.

Equally important, the Trump Administration overstated the benefits of its tariffs and underestimated their economic costs by neglecting the role of exchange rates and the nature of global supply chains. An increase in tariffs induces exchange rate movements that at least partially offset the effects of the tariffs on the trade balance. American industries rely on global supply chains, and imported inputs are necessary for the production of American exports. Import barriers also act as export barriers and higher import tariffs hobble the competitiveness of American corporations in global markets.

Moreover, the Trump Administration has been inconsistent with its stated objective of using tariffs to eliminate their bilateral trade deficits. The administration announced a baseline “Liberation Day” tariff of 10% even on countries—Australia and Brazil, for instance—with whom the U.S. has a trade surplus. The U.S. generally has a surplus in service trade with many countries but the administration seems to have disregarded it. One of the most important American service exports is higher education but the Trump Administration in this case has displayed blatant disregard for trade balance with its multi-pronged attack on universities and its hostility to international students.

Read the full article at the link above.